Euro Sun Mining Inc (CPNFF)

[konik]

The Ultimate Leveraged Gold Play

Well, there are quite a few ways to ride a gold bull market. One of them is by following the big gold stocks that provide steady and slow growth, and the royalty stocks. If you are quite late you’ve probably missed this part. That means you have to find something that is still undervalued and usually moves later on in the bull cycle.

Lucky for you, there are development and exploration companies which move later but a lot further in a real gold bull market. If you leave aside the exploration companies due to their enormous risk (uncertainty of finding an economic deposit, their risk of dilution) you’re only left with the development space.

The most undervalued development company out there is ESM. It’s the second largest undeveloped gold-copper deposit in the EU. It has a total of 10Moz of Gold equivalent (7Moz Gold and 1.4B lbs of Copper) and that makes it a Tier 1 deposit!

Tier 1 deposits are rare and Precious. That is because the effort and the risks involved when bringing a project into production are the same weather it’s a huge or a really small deposit. The only deference is that the big deposit in much more economic and provides the owner company more free cash flow and a bigger mine life.

Now let’s have a quick run into ESM. It’s a company run by a good management team with a proven track record which can be found in detail in their website’s presentation. Its asset is a combination of 3 deposits (Rovina,Colnic,Ciresata) which are really close to each other and they will use the same facility for the material process. They are all owned 100% by ESM
Colnic ?2.2Moz Gold & 302M lbs Copper
Rovina ? 1Moz Gold & 573M lbs Copper
Ciresata ? 3.8Moz Gold & 518M lbs Copper

The CAPEX for the facility is ($339M) and the production of the mine is expected to be around (139koz/year). That is a very low CAPEX given that most projects in a similar size need closer to 1billion in order to build the mine.

The stock is valued as of today 22/12/2020 at 4$/oz in the ground when projects that have measured resources are valued at an average of 40$/oz. That is calculated by dividing the MCAP of the company (in USD) by the number of ounces that exist in the ground. Now I don’t suggest that it will be a (10-20) bagger in the next year, but it’s really probable that the valuation will be closer to a higher number than a lower.

The MCAP is $40M, while the company has enough cash to fund its work($15M in the bank), at least until spring 2021(as mentioned by the CEO from the last interview to date). The NPV is 750M US$ only for the Colnic deposit. It’s expected that in the beginning of the next quarter they will have completed the bankable feasibility study (BFS) which will include the numbers of the Rovina deposit, and the NPV is expected to be around 1 Billion $ and the mine life will be expected to be 20 years. During a bull market, development companies usually tend to trade and 1 X NPV or sometimes even higher.It also worth mentioning what Leveraged gold play means. Spot Gold 48% higher than PEA delivers 340% Higher NPV.
They also expect that in the next quarter they will get the final permit that is needed and they will bring the company into production decision. After these 2 events occur the company will be probably rerated significantly. Now, you will probably have the question,” Why is the company so undervalued? “That is happening because a company named Gabriel Resources didn’t get one of the permits for the mine because it wasn’t environmentally friendly (it was using cyanide). The ongoing BFS of ESM has less NPV that it should have, because it’s not recovering as much gold as it should if it was using cyanide in order to get the final permit. Also, the relations between ESM and the government seem to be excellent, while ESM’s workforce is mainly from Romania (with the exception of the CEO).

There is also strong fund support in the company while some of the biggest gold funds in the world own 35% of the company, and during mid-summer Sprott Capital Partners invested $20M in a price higher that the price the company is trading today.

More information about ESM and the topics mentioned above can be found on the company’s website while I strongly recommend, to give a look at the latest interview of the CEO by Mr. Crux Investor

ESM Analyst Valuation of 3$: insert-text-here

ESM presentation can be found: insert-text-here

ESM CEO interview by Crux: insert-text-here